‘Misleading and deceptive’ conduct in sales campaigns

Real estate agents will be bolstered by a recent decision of the Supreme Court of Appeal on the subject of ‘misleading and deceptive’ in sales campaigns.

The case of Hyder v McGrath Sales Pty Ltd [2018] NSWCA 223 related to the sale of a luxury ($9.4m) property in the Eastern Suburbs by former McGrath agent Ben Collier in 2014 – 2015. It was accepted that incorrect information had been communicated to the purchasers regarding additional ‘private parking’ that came with the property.

The purchasers appeared to be claiming up to $1.1m in damages, after it transpired (post-settlement) that a certain parking area which it had been told was for their ‘private use’ was in fact to be shared with the neighbours.

The Court found in favour of McGraths on the basis that there was no ‘misleading and deceptive’ conduct – but, even if there had been, it could not be said to have been the cause of any loss to the purchasers.

Helpfully for real estate agents, the Court of Appeal upheld the validity of standard, pro forma disclaimers which most agents include in their marketing material (i.e. that the estate agency cannot guarantee the accuracy of the information etc.).

The Court found that, where an agent is a ‘mere conduit’ of information passed to it by the vendor, it cannot be held liable for ‘misleading and deceptive conduct’ – even when the information proves to be false.

Elements of a successful claim

Separately, the Court reiterated that, even where there is ‘false and deceptive’ conduct, a purchaser would still need to establish three things:

(1) ‘Loss’ i.e. that the property was objectively worth less in value when assessed with the correct information;

(2) ‘Causation’ i.e. that it was the agent’s particular conduct which caused the purchaser to sustain loss; and

(3) That there was no ‘Contributory Negligence’ on the purchaser’s behalf i.e. that, if they had not made proper inquiries themselves, they would not have averted the loss.

The purchasers were understood to be wealthy, savvy and intelligent persons with a background in property development, which certainly weighted against their case.

Further the evidence appeared to show that, in the negotiations which took place, the purchasers did not place much or any emphasis on the availability of additional car spaces when formulating their decision to purchase the property at the price they did.

Conclusion

There was one further lesson in this case for real estate agents, which is to try do nothing in any communications to change their role from that of a ‘mere conduit’ of vendor-information to that of some kind of specialist or verifier of facts. When looking at other cases, it appeared that an agent using a phrase like ‘solid investment’ in brochures and providing a financial source for that assertion, could lead to the agent not being a mere conduit but rather someone who is vouching on the accuracy of information to support the contention.

As always, if you have any questions about anything raised in this article, please do not hesitate to contact the office to discuss.